By February 23, 2011, European Union member states are obligated to implement new timeshare laws to comply with European Parliament and European Union Council Directive 2008/122/EC. The directive substantially broadens consumer protection, as well as the range of timeshare, holiday accommodation products, resale, and exchange contracts subject to such regulation. United Kingdom Statutory Instrument 2010 No. 2960 is a good example of implementing regulations.
These laws affect U.S. companies with multi-site properties in mainland Europe and the United Kingdom, and advertising and sales efforts aimed at citizens in those countries.
Timeshare and Holiday Product Contracts. Regulations apply to a wide range of contracts, having a duration of one year or longer, in which a consumer acquires a right to overnight accommodation for more than one stay or acquires discounts or other benefits related to accommodation. As a result, consumer protections will now extend to contracts for deeded and non-deeded timeshare products, destination clubs, and travel clubs, as well as cruise ship cabins, caravans, and other shared leisure products. Hotel loyalty programs offered without charge are excluded.
Brokers, Resellers, and Exchange Companies. Not only the initial seller, but resale brokers and exchange companies must also comply with certain provisions of the regulations. Resellers must adhere to equivalent pre-contractual disclosures, contractual formalities, and rescission rights as required for initial sales. In addition, resellers may not charge or collect advance payments for their services. Offers of exchange company contracts must provide certain precontractual disclosures, follow contractual formalities, and honor consumer rescission rights. If a consumer rescinds a timeshare contract, the exchange contract and other ancillary contracts will be automatically rescinded.
Advertising. Prior regulations have not specifically addressed advertising. Now all advertising of holiday accommodation contracts must include specific language that pre-contractual disclosures may be obtained regarding the advertised product and state how the disclosure may be obtained. Disclosures must be available during any in-person sales or promotional events. Invitations to sales or promotional events must clearly indicate the commercial purpose and nature of the event.
Pre-Contractual Disclosures. Regulations provide standardized lists of information to be disclosed for each type of product and contract—timeshare, holiday accommodation products, resale, or exchange contracts. Such disclosure forms must be made available, free of charge, to a consumer before the consumer is bound to the contract and may be required to be printed in multiple languages, depending on the targeted consumers.
Contractual Formalities. Each contract must be in writing; contain the identity, address, and signature of each party; and may be required to be translated, depending on the languages of targeted consumers. Contracts for the offer of a single-site deeded timeshare must be translated into the official language of the site country. Information provided in the pre-contractual disclosure form is integrated into the contract and may not be altered before the contract concludes—unless the consumer specifically accepts changes to the disclosure form or unless such changes were unusual, unforeseen, and could not be avoided after the exercise of due care.
Right of Rescission/Withdrawal. The rescission, withdrawal, or “cooling off” period runs 14 days and, in most cases, starts on the date the contract is completed and binding on both consumer and seller. The withdrawal period will be extended if the consumer does not timely receive the pre-contractual disclosure information. No advance funds, deposits, or other consideration may be accepted from the consumer during the withdrawal period, not even escrowed deposits. The seller/broker must specifically draw the consumer’s attention to these withdrawal rights, and the consumer must sign those sections of the contract describing these rights. Consumers are to be provided separate forms to facilitate the notice of withdrawal.
Enforcement. Unlike prior regulations in which enforcement mechanisms were unclear or lax, new regulations require identification of public enforcement agencies and creation of dispute resolution procedures with consumer and trade associations, as well as civil court recourse. In Great Britain, for example, the local weights and measures authority is granted enforcement authority with the power to levy penalties and fines.